Business class fares to South Africa plummet 80 per cent in 2016

By |April 17th, 2016|Airlines, Airports, Business Class BC, Business Travel, Region - Africa / Middle East, Region - Europe, Region - North America|Comments Off on Business class fares to South Africa plummet 80 per cent in 2016

South-African-Fares-MapIf you’re thinking about visiting South Africa but are short on time, two non-stop options currently exist from the U.S.  First, South African Airways flies nonstop from New York, but departs Kennedy Airport at 11:15 AM, making connections difficult from interior U.S. cities. Delta also operates nonstop service to Johannesburg via its Atlanta hub. While nonstop flights are convenient, saving up to 24 hours of travel time compared with connecting via Europe, they’re certainly not cheap, blogs Lars Condor, the Managing Director of Passport Premiere.

In 2015, Delta’s business class fares to South Africa routinely exceeded $17,000 round trip on peak travel dates. On February 15th, 2016 Delta business class fares plummeted over 80% to just $3,267 round trip from select cities. So how could a business class seat that sold for over $17,000 just six month ago lose 80% of its value?

A casual observer may think intense competition caused fares to drop. After all, free market capitalism is alive and well in the USA and consumers win when airlines compete on price, right? It’s a nice idea, but years of mergers and consolidation have made price competition amongst airlines a theory rather than market reality. Though Emirates did initiate a fare sale in February, it’s not a true direct competitor with Delta’s nonstop flights. All Emirates flights connect via Dubai adding up to 20 hours of travel time. Additionally, Emirates doesn’t belong to any of the major airline alliances so nearly 20K of elite status miles would be wasted. Bottom line, Emirates doesn’t directly compete with Delta and is NOT the sole reason why Delta’s fares collapsed.

So if competition didn’t cause fares to crash, maybe Delta was in the giving mood and decided to “give back” in the form of an 80% fare cut. Not a chance. Airlines don’t give anything away.

Perhaps fares were massively overvalued at $17,000 round trip, and Delta finally ran out of “suckers” willing to overpay. There’s nothing like a little Wall Street panic to cause excessive fare premiums to drop and drop fast! As stock markets were in “panic mode” in the beginning of 2016, institutional and individual travelers started to rethink their spending habits. In 2015, parabolic gains in tech stocks like Facebook and Netflix concealed the anemic performance of the energy and manufacturing sector. As oil prices continued to fall, the buying power of energy producers and manufacturers was diminished. Though people are just starting to pay attention, the world’s been in an industrial recession for over a year. Carriers use business class buying events to respond to sharp drops in demand and fill seats that would have otherwise been unsold. Once Delta sells a sufficient number of seats, the carrier will likely restore prices higher than were for the remaining 30% of its business seats.

Quite simply, a shortage of buyers willing to pay outrageous prices is what caused business fares to fall from $17,000 to $3,267. Remember, the value of an airline seat is only validated once someone buys. Without buyers, a seat is truly worthless. Think about it.

Business class buying events are expected to continue and shift to Asian and European destinations in spring 2016. The tragic events in both Belgium and France may cause a slowdown in travel to Europe this Summer, which may accelerate discount opportunities.